The following post originally appeared on Forbes | August 24, 2015
Starting out in 1903 with $28K in loans, Henry Ford launched Ford Motor Company on Mack Avenue in Detroit, Michigan. And though, at the time, they were producing just a few cars a day, big dreams and Henry Ford’s brilliant mind and work ethic spawned a behemoth that has grown to more than 224K employees working in 90 plants around the world, and producing $135.8B in revenue (2014). A true automotive and American icon, the multinational corporation currently sits at # 9 on the Fortune 500 list.
With such growth – the size of the automaker’s footprint, in particular – comes incredible challenges: Managing operations, quality standards, and production deadlines is at best problematic. Certainly, navigating all of the regulatory and legal complexities that accompany this is even more so. Few understand this better than David Leitch, Ford Motor Company’s group vice president and general counsel. And, with his distinguished past – graduated #1 in his class at University of Virginia School of Law, clerked for U.S. Supreme Court Chief Justice William H. Rehnquist, made partner at Hogan & Hartson (now Hogan Lovells), and served both as chief counsel for the Federal Aviation Administration (most notably during the September 11th crisis) and deputy counsel to President George H.W. Bush – few are as equipped to handle those complexities.
Being the epitome of the informed and savvy legal consumer, I reached out to Leitch to get his views on, among other things, the legal market, the billable hour, and some of the points he considers while purchasing and managing legal services. See a condensed version of our exchange below:
On The Influence Of Globalization On Biglaw
Parnell: Let’s just start at the beginning and talk about globalization. At Bloomberg’s Business Of Law Summit, you mentioned globalization as being an impactful force on Biglaw today. Can you expand on that a bit?
Leitch: I think I may have been talking about one of the major things we’ve done at Ford in the last ten years, which is to become a more global legal organization. We’ve always had people around the globe, but we weren’t a “global” organization. As the world shrinks and gets flatter, or however you want to put it, many companies are doing the same thing; particularly, as you think about realizing efficiencies and limited resources, you don’t want to have overlapping expertise in places where you don’t need it.
And so I don’t know if it’s the most important factor for some big law firms, but, I think it’s really quite important, and you only have to look at the law firms’ behavior to confirm that, because they are engaging in global mergers and becoming much bigger players – you know, the Dentons, and the Hogan Lovells, and the other large players around the Globe. So, they obviously have thought this is an important trend as well.
On Decision-Making Regarding Law Firm Choice
Parnell: Revisiting the [Bloomberg] Summit, at least some of the other GCs were talking about a level of focus on smaller regional practices for representation as opposed to the bigger firms for their work. Are you and your team focusing one way or the other? What is the mix for you?
Leitch: No. I don’t think we start out by saying “what kind of firm do we want?” We look at the problem that we have and decide what the right solution is for it. So, for example, if you have an issue that is cropping up in multiple jurisdictions – to use a hypothetical, maybe there’s a particular practice that a company is engaged in that is gaining the attention of various competition authorities around the world — then you would want a firm that can look across jurisdictions and give you advice that takes into account the places where you do a lot of business; you want more coordinated advice. Whereas, if you have a problem that is idiosyncratic to a particular country, you could use a global law firm, they might have that kind of expertise, but you also could easily decide that the best law firm is a regional or even a much more local law firm in that particular jurisdiction. So, we don’t start out by looking at the problem in saying “what kind of law firm do we want to use?” We look at the problem we are trying to address and decide what the best way is to handle the problem: globally, regionally, nationally, or locally.
On Categorizing Law Firms
Parnell: So, going back to the terms of “global,” “international,” “regional,” from your viewpoint, when you look out at the marketplace of law firms, is there a particular way that you look at them? In other words, what are the definitive attributes of a firm that you’re looking at when you are deciding on hiring one?
Leitch: I don’t use these terms. I don’t try to define law firms; I try to solve problems. So I’m looking for expertise. I’m looking for value. I can’t ever say that we’ve sat around and said “this really requires a full-service firm,” or “this one should have a boutique.” There are different problems that just require different solutions, and putting labels on them doesn’t necessarily help a lot.
But having said that, there are types of litigation, for example, where you would say a boutique law firm is probably better able to handle it. And there are other types of litigation where you say there’s a national issue, and need somebody that has the resources to handle a big matter.
Parnell: I’m framing this question from the viewpoint of a law firm chair, or even, let’s say, a rainmaker who would like to work with a “Ford-type” of client, for instance. I think many of the firms out there today are having difficulty defining who they really are, classifying themselves, and as a result, have difficulty differentiating themselves.
Leitch: You know, it is interesting: We use a firm, now that you mention that – Snell & Wilmer – that I think defines themselves as a “Western” law firm. I don’t know exactly what the term they use is, but I think if you go to their website, they would say “we’re not trying to be a national law firm; we’re trying to be the firm that you use in the Western part of the United States – a regional firm.” An excellent regional firm.
So, they’ve made the decision. Maybe others should too. You see some firms advertise themselves as “Midwestern” firms, for example. Clearly there are firms who’ve said “this is our niche.” But having said that, we use Snell & Wilmer for a lot of things, and we don’t use them because they’re a “Western regional” firm; we use them because we have a long relationship with them, and their lawyers provide great value for us, and deliver really excellent service. We know where their footprint is, so we use them there.
Now, I guess if they had decided they wanted to become a national firm, the question then would be for us, “Can we still get the same service that we want? Or does this somehow dilute their brand.” And that would just depend on their managing their growth and quality control.
On Types Of Technology That They’ve Been Implementing
Parnell: Now, technology: what are you doing internally? Where are you focusing your capital and resources, from a technological aspect, to make life easier for your team?
Leitch: I think the thing that has been most impactful for us has been e-billing and matter management. We have rolled those out in the U. S. first, and now we’re taking them across the globe. They’re already used in, I would say, most of our practices around the world. But those are two that make a difference in terms of our ability to manage matters, and to manage outside counsel. They are very effective.
Parnell: Is there any technology that you’re looking at down the road? Something that maybe you’re keeping an eye on that you’re not using right now?
Leitch: Well, we actually just rolled out a compliance app. It’s an app for all of our employees to put on their phones and it provides lots of information on our code of conduct. It addresses things like frequently asked questions about gifts and expenses, entertainment, the kinds of things you want people to think about when they’re on the road. So that’s been an exciting development for us. Our office helped create it and issue it, but it’s something the whole company is using.
I think what will be interesting to see is how in-house practices are going to be able to use big data and analytics over time. And, I think we’re just at the early stages as a profession of really thinking about that and getting our arms around it.
On The Notion Of Completely Removing The Billable Hour
Parnell: The Billable hour – it’s demonized. You’re someone who has experienced it on both sides of the fence: in-house and private practice. What if the market were able to completely eradicate the billable hour? Could you talk to me about that in a hypothetical manner? There has to be some down side to the getting rid of this completely…
Leitch: Well, far be it from me to suggest the downsides of getting rid of the billable hour, but look, there are lots of professional services that are provided on a basis apart from the billable hour, like investment banking, audit services to some extent, and lots of other examples. So there are clearly ways to structure the relationship that don’t require the billable hour. And we, like every other in-house office, have used a lot of those and had great success with a lot of them.
The one thing the billable hour does give you is obviously it’s very mathematical, and you can see pretty clearly what you’re paying for a person, as opposed to some big blob of charges. It used to be the case that big clients would just have a bill once a year that said “for services rendered.” Going back fifty, sixty years, I’m sure that was the case. So, you don’t want to go back that far, where it’s just this undifferentiated bill. How do you know if you’re really getting value, then? I think that you see that a lot of times in the investment banking world. It’s just kind of a fee that feels like it’s relatively arbitrary. So that’s the risk.
On Sharing Risk With Their Legal Service Providers
Parnell: Okay, now as far as risk sharing is concerned, that’s kind of a hot topic. How do you, at Ford, do that at this point? I assume that you’re using risk sharing, at least to some degree, but could you talk to me about that?
Leitch: Yes. I think, certainly, fixed fee arrangements distribute and share the risk, right? They don’t share the risk of the ultimate outcome, but they share the risk of the efficiency or the inefficiency of the process. And so we have a lot of fixed fee arrangements on product liability matters, and we do share the risk with our outside counsel. But a particular year will be either more or less active in the region of the country that they’re covering. We have ways to reevaluate that risk if it gets out of whack, but that’s a significant amount of risk-sharing.
We have also used some contingency fee arrangements when we’re pursuing recoveries. So that’s obviously the classic form of risk-sharing. I think it’s fair to say that anything that does other than just pay somebody their hourly rate times the number of hours they’ve worked ends up being risk-sharing. For example, a blended rate is risk sharing with the firm because the firm then has to figure out how to be successful and still get the job done in an efficient way that gives it a return on its investment.
Parnell: Liberalization: what are your thoughts on this? Are you for it? Against it? Do you see it happening at some point here in the [United] States?
Leitch: I come at these kinds of questions with the perspective that the law is, and should remain, a profession. And that we need to have ownership and governance structures that treat it that way. So, I would worry a lot about liberalization. I think outside ownership of law practices presents a host of issues that I don’t think we’re really prepared to address, in terms of loyalties, and conflicts, and who’s calling the shots. With the law-firm partnership, there are enough issues with conflicts within the partnership itself in dealing with the partnership structure. But if you have to go outside and figure out “who owns a piece of this,” and “what are their interests,” and “what else are they invested in?” I just think it removes some of the important regulations on our industry.
On Building A Law Firm From The Ground Up
Parnell: Okay, now talking about law firms, you have, certainly, a very interesting perspective, having worked in government, in-house, and with a major firm. If you, God forbid, were to be let go from Ford and you wanted to go out on your own — you were going to start a law firm — at a higher level, how would you go about doing this? What would be your strategy to put together a firm that’s going to be valuable? A firm that is going to be of interest to in-house clients?
Leitch: Well, I guess I’d first have to decide what my objective was. If my objective was to maximize profit, I’d probably put together a different kind of law firm. But, if my objective was to build a practice that gives some healthy return, but was also fun and interesting and attractive to clients because of the characteristics of the firm, I would try to have a small and focused group of really talented lawyers.
If we could get a number of attorneys who had some significant in-house experience, I think that would be really helpful. I think people who are in-house often feel that lawyers who’ve only worked in firms don’t fully understand the world that we live in, and all the different incentives, and pressures, and factors that govern our decision making. I think having some people who had spent time in this environment would be really helpful. And attorneys from different places, too, so we could aggregate the experiences of me at Ford, and someone else at a different company, someone else at a different company, and have not just one perspective. So, I would look for a core group of really intelligent, fun, and experienced people.
I think my hypothesis is that the practice of law, in-house, has more commonality across industries than differences across industries. Obviously there are differences: We’re regulated by NHTSA, and drug companies are regulated by the FDA, and they have a whole host of things behind them, for instance. But we all deal with SEC filing requirements; we all deal with some form of litigation; we all deal with boards of directors; we all deal with tax matters, corporate tax matters; we all deal with intellectual property. But, we don’t all do it in the same way. And so having that diversity of experience across industries is fine, but I think even just diversity from among various large companies.
On The Attributes That He Looks For In A Trusted Advisor
Parnell: Think of your most valuable legal advisor: What are the attributes that make them so? I’m asking this from the viewpoint of the attorney who is reading this piece and thinking, “What would make me and my firm of interest to someone like David Leitch?” With that in mind, what would be the attributes that you look for, or that you find in your best advisors?
Leitch: I think there are several characteristics that come to mind. I’ll mention them as they come to me, not necessarily in the order that I would rank them.
Anticipating my needs, and yet doing so in a way that’s not intrusive. By that I mean that a really valuable lawyer has a touch to know when they’re being helpful and when they’re just trying to sell you something. The lawyer who has the appropriate touch, when they call me and tell me they’re thinking about something they think I should be thinking about, I say “you know, you’re right, and let’s work on that.” There are a lot of lawyers who call me and tell me I should be thinking about something just because they have something they want to sell me. I’ve had law firms make pitches to me, and sometimes they’ll say “have you thought about this, that, or the other issue?” And you almost want to say “of course I’ve thought about it!” They’re just trying to sell you something that you don’t need because it’s what they can sell. And so I want somebody who is going to anticipate my needs accurately.
Responsiveness is really important. When my client asks me a question – the chairman of the board, or the CEO has an issue that’s bothering them – and if I need to turn to outside counsel or something like that, I can’t say “well, they haven’t called me back, yet. I’ll just call the next guy. ” So, responsiveness is important. It’s pretty basic, most really good lawyers do it, but you hear a lot of times about people who are just not as responsive as they ought to be – maybe they’re too busy, maybe they’re careless, I don’t know.
Another characteristic is obviously expertise. That’s kind of what they’d call a hygiene factor, and you’ve got to have that. It’s just the price of admission: relevant expertise.
Lastly, the really critical one is a kind of judgment and sensitivity. A lawyer who can understand the subtleties of the situation, who can be creative, who can make judgments about hazy unclear issues in a practical way, that is really a gift.